Oct. 22, 2023
Dear Chairman Gensler, I am writing in response to the proposed rule "Safeguarding Advisory Client Assets" (the "Proposed Rule") by the Securities and Exchange Commission (SEC) in keeping with the request for public comment. While I commend the SEC for taking measures to enhance investor protections and address gaps in the custody rule, I have some concerns regarding the compatibility of this rule with existing legal frameworks, particularly in relation to digital assets. These concerns must be duly considered and addressed to ensure the effectiveness and harmony of the Proposed Rule. Given the increasing prominence of digital assets, such as cryptocurrencies, it is paramount to ensure regulatory frameworks remain adaptable and compatible with evolving market dynamics. It is widely recognized that digital assets present unique challenges and uncertainties regarding their regulation and classification. Therefore, it is vital that any new rule, such as the Proposed Rule, is thoroughly reviewed to avoid any conflicts or inconsistencies with existing laws and regulations, including constitutional provisions and statutory frameworks. Ensuring coherence and alignment with the broader regulatory landscape will promote legal certainty and deliver effective outcomes while guarding against potential legal challenges that may undermine the objectives of the rule. Consideration must also be given to the potential economic impact of the Proposed Rule. It is important to recognize that increased compliance costs, reduced market liquidity, and decreased operational efficiencies may hinder market growth and limit opportunities in the dynamic digital asset sector. Various studies have indicated that overly burdensome regulations can impede innovation and stall market development. Therefore, there is a need to strike an appropriate balance between safeguarding investor interests and fostering an environment conducive to the growth and innovation of the digital asset market. This balance will promote the efficient allocation of capital, ultimately benefiting both market participants and investors. In addition to the aforementioned concerns, clarity and precision in the language and requirements of the Proposed Rule are vital. Investment advisers must be provided with unambiguous guidelines to ensure they can effectively implement the rule's provisions. Ensuring simplicity and transparency in the rule's processes and requirements will facilitate compliance efforts without unduly burdening industry stakeholders. Clarity and simplicity are paramount for legal certainty and effective implementation. Lastly, it is crucial to consider any unintended consequences that may arise from the Proposed Rule. While investor protection is undoubtedly a primary objective, it is of utmost importance to avoid stifling innovation and inadvertently restricting the potential benefits and advancements that digital assets offer. Simplifying the rule and adopting a transparent approach will help prevent unintended negative repercussions and preserve the inherent advantages of the rapidly evolving digital asset market. In conclusion, I appreciate the opportunity to express my concerns and thoughts on the Proposed Rule. I respectfully urge the SEC to carefully consider the compatibility of the rule with existing legal frameworks, to strike a balance between investor protection and market growth, to provide clear guidance for effective implementation, and to avoid unintended negative consequences. These considerations will contribute to a robust and effective rule that provides the necessary safeguards while fostering innovation and capital formation in the digital asset market. Thank you for your attention to this matter. Sincerely, Mr H Yilmaz